GAO nudges Pentagon to improve its contractor records

By Charles S. Clark

April 10, 2012

The Defense Department continues to use faulty data in determining the number of contractors each military service relies on, complicating efforts to enforce rules that require agencies to tap federal employees to perform functions considered inherently governmental, according to a report by the Government Accountability Office.

With the exception of the Army, the military services -- which together contracted out $204 billion in fiscal 2010 -- have made only “incremental improvements” toward centralizing inventories of contractor data that have been limited in utility, accuracy and completeness, GAO said in the report released Monday.

Overall, the department “has not resolved the fundamental issue of how to collect the required data to meet the legislative inventory requirements, including manpower data directly from contractors.”

Such data are vital to Defense decisions on whether to “insource” work now being performed by contractors in a period of tight federal budgets.

GAO spared the Army from its critique, noting the service’s success with its Contractor Manpower Reporting Application, which “collects data reported by contractors on services performed at the contract line-item level, including information on labor hours and the function and mission performed.”

The other services, by contrast, depend on the Federal Procurement Data System-Next Generation, which does not “identify more than one type of service purchased for each contract action, provide the number of contractor full-time equivalent personnel or identify the requiring activity,” the watchdog said.

Defense does not expect to fully collect contractor labor data until fiscal 2016. But officials largely agreed with GAO’s recommendations, noting the department had published a plan to improve inventory reviews in November 2011.

The number of contractors and the questions about their value to the government were the subject of a Senate Homeland Security and Governmental Affairs ad hoc committee hearing on March 29. Sen. Claire McCaskill, D-Mo., expressed frustration at the Pentagon’s reliance on contractors and praised the Army for “setting a standard” for the rest of the defense community on proper contractor use to promote cost-effectiveness.

Contractors tend toward a different view of the cost-savings and inherently governmental issues. “The key to getting the ‘right’ answer for the American taxpayer in cases where cost is a factor lies in ensuring that the government is using the best and most complete taxonomy for conducting its cost comparisons,” Stan Soloway, president and chief executive officer of the Professional Services Council, said in testimony submitted to McCaskill’s committee.

“While we recognize that there are clear limits to the scope of work that is appropriate for the private sector to perform for the government, it is also true that the innovation, skills, agility and competitive spirit of the private sector are the engine that drives our economy,” he said. “Any decision to perform work inside the government that is appropriate for the private sector to do must be accompanied by real analytical rigor.”